How is artificial intelligence and open banking changing the face of business finance, what is the future for fintech innovation and why is AI bias such a big problem? Chirag Shah of Nucleus Commercial Finance Ltd addresses all these points and more..
How did you get into the fintech industry?
My main motivation was after identifying significant challenges with the availability of SME data when I started Nucleus. Another inspiration was Uber; the simplicity of the concept, its ease of use and the part it plays in everyday life. I wanted to provide tools and funding to enable SMEs to be run more efficiently.
What is the story behind Nucleus Commercial Finance Ltd and what did you want to achieve?
When I started Nucleus back in 2011, I wanted to make us an alternative lender in the UK SME market. I wanted to provide a multi-product offering which was similar to what the banks already did but had a quicker application process, making it easier for SMEs to access. Since then, and over the last seven years in particular, we have focused on becoming a true partner for SMEs, helping them to use their data more effectively to make more timely decisions and providing our clients with clear visibility in terms of liquidity and our available loans offerings. Today, we are a leading fintech company in the UK, with market-leading technology capabilities.
What core products does Nucleus Commercial Finance Ltd offer and how do they help the customer?
For more than 11 years now, we have been supporting UK SMEs with critical funding. During that time, we’ve improved the business by adding new products and talented people to our ever-expanding team. By leveraging the best-in-class technology, we can quickly provide SMEs with the funds they require. We give our clients the choice and flexibility they need to thrive by offering them funding between £3,000 and £5 million through both secured and unsecured products. Additionally, our award-winning technology has enabled us to streamline and automate the whole process to provide a hassle-free funding journey for both our clients and introducers.
As far as the availability of business finance and lending, what are the biggest challenges involved, and how are you helping borrowers deal with them?
There is a distinct mismatch between SMEs’ expectations and what lenders can offer. As a result, we are seeing fewer approval rates, lower amounts offered, higher rates and more security requested by lenders across the market. This has created a dysfunctional market. Despite this, we are seeing signs of improvement and expect that lending conditions will get better in the second quarter. This will be driven by artificial intelligence and machine learning, which has enabled lenders to shorten the loan application time, provide instant decisions, and enable better decision-making on credit and greater access to finance for SMEs with shorter trading histories. We have focused on becoming a true partner for SMEs, helping them to leverage their data in order to make more timely decisions and providing our clients with clear visibility in terms of liquidity and our available loan offerings.
How can SMEs access finance more easily through technological advances such as artificial intelligence and machine learning, combined with the advent of open banking?
On first impressions, AI and open banking may seem completely unrelated concepts. But combined they are fundamentally changing the way that the lending industry works – for the better. That’s because, while open banking brings unparalleled access to vast swathes of customer data, without AI, analysing that data would take a huge amount of time and resources, thus limiting the number of credit applications lenders can process, as well as their potential profitability.
AI bias become a well documented problem of late. Why is this and how is the credit sector tackling the issue?
AI has the potential to incorrectly and unfairly interpret data, often favouring one group of people over another. The problem has been exacerbated by humans choosing the data that the algorithm will use and how those results will be applied and then the AI systems merely replicate those biased models in a continuous vicious circle. By understanding how algorithms make decisions, and closely monitoring the data they use to quickly detect and eliminate any issues, the credit sector is leading the way on tackling AI bias. But it still needs to go further to ensure that certain groups of customers aren’t unfairly discriminated against on key lending decisions.
Over the next 10 years, what will be the biggest disruptors in business finance?
AI-driven platforms combined with embedded finance solutions will help overcome key issues and challenges in business finance. In the future, it will be a quick, short user journey, with the aim of providing one-click lending. SMEs are also being enabled to make informed decisions in a timely manner by real-time insights gathered from data analyzed by Fintechs’ platforms. As we collect more data and enrich the AI platform, it will enable better predictions for companies. Our Pulse product is a prime example of this.
In terms of fintech innovation, what will be the biggest challenges ahead?
We need the full ecosystem to develop and harness the benefits of technology and AI. The biggest challenges we see are the reluctance and slow adoption by incumbents, such as banks, and oversight by regulators. Platforms over-promising and under-delivering is another problem. When we are trying to increase acceptance of fintech solutions among business owners this is a significant risk. Finally, there’s the issue of compliance.
How can fintech work alongside traditional banking and finance, rather than been seen as a competitor?
There are increasing cases of new partnerships between banks and fintechs. As fintechs need to deliver results, gain trust and remain transparent, and banks must weigh risks of adoptions with the risks of standing still and being left behind, it’s the perfect match.
What are your future objectives for Nucleus Commercial Finance and how will you achieve them?
To provide cutting-edge business insights using our technology. This will include a real-time snapshot of the business to all decision-makers; the ability to drill down into granular detail and make more informed decisions; and one-click lending, so SMEs always know how much they can borrow and can access funds within a matter of seconds.
